
Germany
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Why work in
Germany
?

Grow your team in
Germany
Growing a team means hiring the right employees at the right time and for the appropriate positions. Employers in Germany must have a local legal organization and use local resources to handle compliance, payroll, tax, and benefits management. The complexity of employment regulations in Germany makes compliance with employment laws demanding.
With Gloroots’s Global Employer of Record (EoR) service, you can let Gloroots do the heavy lifting of payroll, tax, benefits, and compliance and concentrate on what matters to you most: your employees and company growth.
Risks of misclassification
Growing a team means hiring the right employees at the right time and for the appropriate positions. Employers in Germany must have a local legal organization and use local resources to handle compliance, payroll, tax, and benefits management. The complexity of employment regulations in Germany makes compliance with employment laws demanding.
With Gloroots’s Global Employer of Record (EoR) service, you can let Gloroots do the heavy lifting of payroll, tax, benefits, and compliance and concentrate on what matters to you most: your employees and company growth.
Employing in
Germany
To establish a thriving employment framework in Germany, it is crucial for businesses to familiarize themselves with German employment and labor laws. This includes understanding minimum wage requirements, working hour regulations, employee benefits, statutory leaves, and contractual obligations. Accurate and compliant payroll management, as well as adherence to proper termination procedures, are also vital.
Staying well-informed about these laws fosters a harmonious work environment, safeguards employee rights, and minimizes legal risks. Seeking guidance from legal or HR experts with expertise in German labor regulations is highly recommended to ensure compliance and foster successful employment practices in Germany. By adhering to these guidelines, businesses can create an attractive and supportive workplace for their employees, driving growth and success in the German market.
If you do not have the in-house compliance and payroll experts to do this, engage with with Gloroots’ Germany EOR.
Legal aspects of employing in
Germany
Working hours
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Payroll
EMPLOYMENT CONTRACT
When hiring an employee in Germany, it is advisable to have a comprehensive employment contract that is signed by both parties. German law distinguishes between fixed-term and permanent employment contracts, including sub-categories such as freelancer agreements and intern contracts.
The minimum requirements for an employment contract in Germany include:
- Names and addresses of the employer and employee
- Start date and duration (for fixed-term contracts)
- Workplace(s)
- Brief description of the work
- Salary information
- Payment methods and payday
- Working hours
- Annual leave entitlements
- Notice periods for termination
- References to collective agreements
Additionally, employment contracts in Germany often cover topics such as probation periods and overtime. Even in cases where a written contract is not provided, it is still mandatory to communicate the essential terms and conditions of employment to the employee in writing. German employment contracts are typically detailed and comprehensive, ensuring clarity and protection for both parties involved.
This might sound overwhelming, but it doesn't have to be. Gloroots eliminates these barriers for you. With Gloroots' Employer of Record offering, hiring and managing employees globally is a piece of cake.
Get an overview of what you need to know when hiring in Germany. Contact us.
Overtime:
The payment of overtime is determined by the terms specified in the employee's individual employment contract or the provisions outlined in a collective bargaining agreement. In situations where the employment contract does not address overtime, employers are prohibited from requiring employees to work overtime unless there is an emergency. Overtime work can be either compensated with additional pay or offset by granting extra time off.
Minimum Wage:
As of October 2022, Germany implemented a national minimum wage of EUR 12.00 per hour, which will continue to be in effect throughout 2023. The next scheduled increase is anticipated to occur in 2024.
Annual Leave:
The legal minimum annual leave entitlement in Germany is 20 days for a five-day working week, or 24 days for a six-day working week. However, it is common for employers to provide between 25 and 30 paid vacation days per year.
Typically, employees are required to use their annual leave within the same calendar year, although some employers may allow carryover into the following year. According to German law, any remaining paid leave from the previous year must be used by March 31.
Additionally, Germany observes eleven official public holidays, with some federal states having their own specific public holidays that companies must adhere to.
Maternity Leave and Paternity Leave
Female employees who are pregnant are eligible for 14 weeks of fully paid maternity leave, consisting of six weeks before and eight weeks after childbirth. In certain circumstances, such as premature birth, the maternity leave period can be extended up to 18 weeks.
While there is no specific paternity leave, fathers have equal rights to parental leave as mothers. This allows them to take time off to care for their child.
Sick Pay:
In case of illness or injury, employees receive their regular salary for up to six weeks. After this period, sick pay is reduced to 70% of their normal gross salary and is covered by the statutory health insurance.
For sickness-related absences lasting more than three consecutive days, employees are required to provide their employers with a medical certificate. Since January 2023, these certificates are issued and submitted electronically by the treating physician. Employers can access the necessary information directly from the health insurance fund.
Tax
INCOME TAX
Income tax rates are progressive in Germany; different rates apply to different income brackets. A solidarity surcharge of 5.5% is imposed on income exceeding EUR 17,543.
Other Taxes and Social Security contribution
Separation
Employment Termination and Severance:
Termination Process:
In Germany, employers have the flexibility to terminate an employee based on valid grounds. For employees who have been with the company for more than six months, termination must be "socially justified" and can be based on various reasons, including:
1. Person-related reasons, such as long-term illness.
2. Termination with the consent of the employee through a termination agreement.
3. Conduct-related reasons, such as repeated breaches of employment terms after prior warning or serious misconduct.
4. Operational reasons, such as company shutdown or economic downturns.
These are some of the justifications that employers can use when terminating an employee in Germany, ensuring that the termination is legally valid and reasonable.
Notice Period:
The length of the notice period required by law for employers in Germany varies based on the employee's length of service. Employees who have been employed for less than 9 months are entitled to a minimum notice period of four weeks. For employees with over 20 years of service, the notice period can extend up to 7 months.
Severance Pay:
Severance compensation is relevant when an employer ends a work contract suddenly, mirroring the amount an employee would receive if notified in advance. If a termination occurs due to company operational shifts, the employer is typically required to offer severance pay, often equating to two weeks of regular salary for each year worked.
Probation Periods:
During the initial phase of an employment relationship, the probationary period in Germany can last up to 6 months. Within this period, the statutory notice period can be shortened to a minimum of 2 weeks, unless other regulations, such as a collective bargaining agreement, stipulate otherwise. It is important to note that during the probationary period, the employer can terminate the employee without providing a specific reason. The termination is considered valid unless it is deemed immoral or against faith.